Rollover Frequently Asked Questions
We field thousands of questions each day about moving old retirement accounts. Here are answers to questions that concerned some of our customers:
- What are the disadvantages to cashing out my existing retirement account?
- Can I defer paying taxes on my retirement money with a Principal Rollover ChoiceSMIRA?
- What if my old employer already sent me a check and withheld the taxes?
- What if my retirement account includes company stock? Am I stuck there?
- What if I borrowed money from my old retirement plan? Can I still roll my old account into a Principal Rollover ChoiceSM IRA?
- Can I combine plans if my new company's plan is also serviced by The Principal®?
- How does my age impact my decision to roll over retirement money?
- How can I save for retirement if I can't contribute to my new employer's retirement plan yet?
- Is it easy to set up a Principal Rollover ChoiceSM IRA?
- Can I roll money over to a Roth or a traditional IRA?
A1. We know it's tempting to cash out your old retirement account. I mean, who couldn't use some extra cash? But before you cash out, here are two big reasons why you should consider borrowing money from another source:
- You could lose as much as 50% of your retirement savings
from taxes and penalties:
- 20% is automatically withheld to apply towards your federal income taxes
- You may also have to pay state taxes.
- If you're under age 59 ½, you'll most likely be charged an extra 10% IRS penalty for "premature withdrawal."
- That money won't be there when you retire.
Consult your tax advisor for full details.
A2. Yes! When you roll money from your old retirement account directly into a Principal Rollover ChoiceSM IRA, 100% of your nest egg goes to work for you immediately. You don't have to worry about current taxes or penalties cutting into your retirement savings.
Q3. What if my old employer already sent me a check cashing out my old retirement account and withheld 20% for taxes?
A3. If it has been less than 60 days since your employer cashed out your old account, you can still invest in a Principal Rollover ChoiceSM IRA.
Call us at 1.800.247.8000, ext. IRA to find out what your other options are if your 60 days have passed.
A4. Generally not. Our financial experts can help you decide whether to:
- Sell your company stock and invest the money in a Principal Rollover ChoiceSM IRA.
- Or, keep the stock and move the rest of your retirement savings.
Q5. What if I borrowed money from my old retirement plan? Can I still roll my old account into a Principal Rollover ChoiceSM IRA?
A5. In most cases, you will still have to repay the loan or taxes on that money, but you can still rollover your remaining retirement account balance into a Principal Rollover Choicesm IRA.
Please be sure to talk to your former employer to determine when the loan needs to be repaid and the best way to repay your loan.
Q6. Can I combine my savings if my new company's retirement plan is also serviced by The Principal®?
A6. If your new employer allows this option, consolidating your savings can be a very convenient solution for you. It's easy to consolidate by:
- Completing the Principal Rollover Form
- Or for faster service, calling toll-free 1.800.247.8000, ext. IRA (472)
A7. Your investment timeframe plays a significant role in any financial decision. Your retirement expert from The Principal® can help you set up a Principal Rollover Choicesm IRA tailored to your own personal circumstances.
A8. You still have tax-deferred retirement savings options. Simply call 1.800.247.8000, ext. IRA (472) and your retirement expert from The Principal® can show you a personalized solution to help you save for retirement today.
Q9. I don't have a lot of time to research options. Is it easy to set up a Principal Rollover Choicesm IRA?
A9. Yes! Setting up your account takes just a few minutes. No matter which method you prefer, a retirement expert can help you open an account quickly and easily:
- Call us at 1.800.247.8000, ext. IRA (472)
- Meet with a local expert from The Principal®
A10. You can roll your old 401(k) or other retirement accounts directly into a traditional IRA. You can also roll them directly to a Roth IRA. We can help you do this. Call us at 1.800.247.8000, ext IRA (472) to discuss which option best meets your needs.